Elice Shares Close 32% Below IPO Price on KOSDAQ Debut as AI Trade Doubts Deepen

Updated 10:40 UTC

Elice shares hit their daily upward limit on Wednesday, Oct. 21, rising 29.9 percent in Seoul. The rebound came one day after the stock closed 32 percent below its IPO price on its KOSDAQ debut. Associated Press reporting from Seoul said the recovery followed a broad return to technology and semiconductor stocks across Asia after a stronger Wall Street session. Share Talk, in its overnight market wrap, reported the same 29.9 percent limit-up move.

The two-day swing sums up the AI trade right now. Investors dumped the debut on Tuesday over doubts about how AI infrastructure spending pays back. They bought the same stock back to its ceiling on Wednesday when chip names rallied. Nothing about the company changed overnight. The price did, twice, in opposite directions.

Updated 15:01 UTC

Elice shares closed at 61,500 won on the KOSDAQ on Tuesday, Oct. 20, down 32.04 percent from their initial public offering price of 90,500 won. MarketWatch, in a Dow Jones report carried by Morningstar, said the 201 billion won offering ended 32 percent lower despite being 389 times oversubscribed. Democrata, citing Bloomberg data, also reported the close at 61,500 won, a fall of 32.04 percent, after a drop of more than 37 percent during the session.

Shares in Elice Group, a South Korean artificial intelligence infrastructure company, plunged on their first day of trading on Tuesday, Oct. 20, opening well below their offer price and sliding further through the session.

The stock opened at 75,700 won on the KOSDAQ market, 16 percent below its initial public offering price of 90,500 won, according to Reuters. It was later trading at 66,600 won, down 27 percent, while the KOSDAQ index was down 1 percent at that point. The Wall Street Journal reported the shares fell as much as 36 percent in afternoon trading to 58,300 won before paring losses to trade around 58,600 won, with the KOSDAQ around 3 percent lower.

A large raise that met a cautious market

Elice raised 201.1 billion won, about 151.12 million dollars, by selling 2.22 million new shares at 90,500 won each, the top of its marketed price range, according to its filing. Demand before the listing had looked strong. Institutional subscription orders reached 388.84 times the number of shares available, according to filing documents reported by other outlets citing the offering.

That demand did not hold once trading began. Investors have grown more selective about AI and data centre companies after an AI led market selloff that derailed other deals, Reuters reported. Planned listings linked to data centre operators AirTrunk and Firmus, and to SB Energy, were pulled or paused as investors grew wary of high borrowing costs.

Why investors are asking harder questions

The weak debut is the latest test of appetite for companies that need large amounts of capital to build data centres and AI computing capacity. Those projects spend heavily up front and earn money back over years, so higher borrowing costs cut directly into their value.

Reuters, in its morning markets note on Tuesday, said the South Korean start also cast a shadow ahead of earnings and spending plans from large AI companies this week, and noted South Korea's tech heavy KOSPI gauge lost nearly 4 percent on Tuesday. Ninghui Liu, head of investment strategy and research for APAC at State Street Investment Management, told Reuters investors are questioning "whether every dollar of AI capex earns more than it costs to finance."

The Journal reported similar caution, pointing to concerns over debt financed AI infrastructure and the long term returns on massive AI related spending, which have contributed to IPO delays and withdrawn commitments elsewhere.

Elice provides AI cloud services and plans to use most of the IPO proceeds for portable modular data centres and related infrastructure, according to reports of its filing. Whether Tuesday's fall is a verdict on Elice itself or on the wider AI trade will be clearer in the sessions ahead, as investors watch both the stock and the earnings of the large technology companies due to report this week.